A low home appraisal can create a problem even when you already have your down payment ready and an accepted offer on the property.
I recently had a client experience exactly that. He agreed to buy a home for $200,000 with a 20% down payment, but the lender required an appraisal. The property came back with an appraised value of just $185,000.
Suddenly, we had a $15,000 gap to deal with. Watch my video or read on for more details:
What Happens To Your Down Payment?
This is where buyers can get caught off guard.
My client was already planning to put 20% down, but the low appraisal meant we had to restructure the deal. The buyer and seller negotiated a slight reduction in the purchase price, and my client had to bring additional money to cover the remaining gap.
That additional money was on top of what he had originally planned for his purchase.
Can You Negotiate After A Low Appraisal?
It’s possible.
In this situation, the buyer and seller knew each other because it was a private purchase. They were able to negotiate a modest price reduction, although coordinating everything around their schedules made the process difficult.
Every transaction is different. Depending on the purchase contract and circumstances, your options may include renegotiating the price, bringing additional funds, reconsidering the financing, or deciding whether the purchase still makes sense.
Why The Appraisal Matters To The Lender
An appraisal isn’t simply another piece of paperwork.
The lender is using the property as security for the mortgage, so its value affects how much the lender is prepared to finance. If the appraisal comes in below the purchase price, the lender generally isn’t going to simply ignore the difference.
That’s why an unexpected appraisal result can change a deal quickly.
Buying A Home Through A Private Sale?
Private purchases can have some additional considerations because there may not be the same open-market transaction and comparable sale process you would normally see with a listed property.
If you’re considering buying a home privately, it’s worth talking to a mortgage broker before finalizing the deal so you understand the financing requirements and what could happen if an appraisal is required.
Whether you are preparing to buy your first home or your fifth, if you’re looking to get pre-approved for a mortgage in Edmonton, fill out my online application. I’m here to help you every step of the way.
About Jason Scott, Edmonton Mortgage Broker
Looking for a personalized mortgage solution? As an Edmonton Mortgage Associate, I’m trusted partner who will help you get the right mortgage for your home or investment property. I’m Jason Scott, and I’ll be your Mortgage Broker in Edmonton.
